The yuan inched up against the US dollar on Friday on corporate sales of the greenback, and the Chinese currency was on track to strengthen for a second straight week. The dollar edged up in overseas markets on Friday morning though it remained on track for weekly losses, as investors shunned big bets and squared their books ahead of the holidays.
The Chinese currency, which has gained some momentum this week, has strengthened around 5.6 percent this year against the dollar - recovering from 2016's roughly 6.5 percent loss, its worst annual performance since 1994. Prior to market opening on Friday, the People's Bank of China set the midpoint rate at 6.5821 per dollar, 26 pips or 0.04 percent weaker than the previous fix of 6.5795.
In the spot market, the onshore yuan opened at 6.5835 per dollar and was changing hands at 6.5723 at midday, 132 pips firmer than the previous late session close and 0.15 percent stronger than the midpoint. The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 95.69, weaker than the previous day's 95.74.
The global dollar index rose to 93.394 from the previous close of 93.278. Offshore one-year non-deliverable forwards contracts (NDFs), considered the best available proxy for forward-looking market expectations of the yuan's value, traded at 6.719, or 2.04 percent weaker than the midpoint.
One-year NDFs are settled against the midpoint, not the spot rate. If the yuan ends the late night session at the midday level, it would have strengthened 0.54 percent this week.
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